Capital Preservation Fund

Transcription

1 Offering Circular June 30, 2017 Y Pricing R6 Pricing Institutional Pricing Institutional Service Pricing Service Pricing R Pricing Capital Preservation Fund A collective investment fund maintained by Federated Investors Trust Company seeking to achieve stability of principal and high current income by investing primarily in stable value products. Not FDIC Insured May Lose Value No Bank Guarantee Substantial Withdrawal Restrictions Apply

2 CONTENTS General Information... 1 Fees and Expenses... 2 Certain Required Disclosures... 3 Investment Information... 6 Valuation of Units Investing in the Fund Withdrawals From the Fund Fund Management Payments to Fund Service Providers Account and Unit Information Participating Trust Information Portfolio of Investments Statement of Assets and Liabilities Statement of Operations Statement of Changes in Net Assets Statement of Cash Flows Financial Highlights Notes to Financial Statements Schedule I Investments Purchased Schedule II Investments Sold, Matured or Redeemed... 37

3 PLEASE TAKE NOTE OF THE FOLLOWING: THIS OFFERING IS BEING MADE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR AN INTEREST IN A COLLECTIVE INVESTMENT FUND FOR EMPLOYEE BENEFIT TRUSTS. NO PUBLIC MARKET WILL DEVELOP FOR THE UNITS OF PARTICIPATION. THE UNITS OF PARTICIPATION ARE NOT TRANSFERABLE OR REDEEMABLE EXCEPT UPON SATISFACTION OF CERTAIN CONDITIONS DESCRIBED UNDER WITHDRAWALS FROM THE FUND. PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS OFFERING CIRCULAR AS INVESTMENT, TAX, OR LEGAL ADVICE. THIS OFFERING CIRCULAR, AS WELL AS THE NATURE OF THE INVESTMENT, SHOULD BE REVIEWED BY EACH PROSPECTIVE INVESTOR WITH ITS INVESTMENT ADVISERS, ACCOUNTANTS, OR LEGAL COUNSEL. EXCEPT FOR CERTAIN PERSONS IDENTIFIED IN THIS OFFERING CIRCULAR, NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS OFFERING CIRCULAR, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. THIS OFFERING CIRCULAR CONTAINS SUMMARIES, BELIEVED TO BE ACCURATE, OF CERTAIN TERMS OF CERTAIN DOCUMENTS RELATING TO THIS OFFERING, INCLUDING THE DECLARATION OF TRUST. FOR COMPLETE INFORMATION CONCERNING THE RIGHTS AND OBLIGATIONS OF THE PARTIES THERETO, REFERENCE IS HEREBY MADE TO THE ACTUAL DOCUMENTS, COPIES OF WHICH WILL BE FURNISHED TO PROSPECTIVE INVESTORS, UPON REQUEST, PRIOR TO ACCEPTANCE OF THEIR APPLICATION AND ADOPTION AGREEMENT ( ADOPTION AGREEMENT ) OR PARTICIPATION AND ADOPTION AGREEMENT AND PLAN ACKNOWLEDGEMENT, IN THE CASE OF AN INSURANCE COMPANY SEPARATE ACCOUNT (EACH AN AGREEMENT AND COLLECTIVELY, AGREEMENTS ). ALL SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY THIS REFERENCE. THE UNITS OF PARTICIPATION OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH OR APPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE, NOR HAS ANY SUCH COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. NEITHER THE ATTORNEY GENERAL NOR THE SECURITIES DEPARTMENT OF ANY STATE HAS PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATIONS TO THE CONTRARY ARE UNLAWFUL. General Information Capital Preservation Fund ( Fund ) was established as a collective investment fund by Federated Investors Trust Company (formerly, Liberty Bank and Trust; and Federated Bank and Trust), a wholly owned subsidiary of Federated Investors, Inc. ( Federated ), under a Declaration of Trust dated March 7, Federated Investors Trust Company merged into a newly created, wholly owned subsidiary of Federated, also named Federated Investors Trust Company (FITC or the Trustee ), on October 25, FITC is organized as a Pennsylvania state-chartered trust company and, as such, it and the Fund are governed by the rules and regulations of the Pennsylvania Department of Banking and Securities as they apply to collective investment of fiduciary funds. In conjunction with the merger, the Declaration of Trust ( Trust Document ) under which the Fund was established was amended on October 25, 2007; was amended and restated on August 30, 2011 and August 23, 2016; and may be further amended from time to time. 1

4 Fees and Expenses Participating Trusts as defined herein may elect the following pricing options: Y Pricing, R6 Pricing, Institutional Pricing, Institutional Service Pricing, Service Pricing and R Pricing (collectively, the Pricing Options ). The Pricing Options have different fees and expenses, which affect their performance. This table describes the fees and expenses that you may pay if you buy and hold each of the Pricing Options. Y Pricing R6 Pricing Institutional Pricing Institutional Service Pricing Service Pricing Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Management Fees % 0.25% 0.30% 0.55% 0.55% 0.55% Fees paid out of Management Fees: Services Fees % 0.00% 0.00% 0.25% 0.25% 0.25% Plan Level Recordkeeping Fees 2, % 0.00% 0.05% 0.05% 0.00% 0.00% Consulting Services Fees % 0.00% 0.00% 0.00% 0.00% 0.25% Participant Level Recordkeeping Fees % 0.00% 0.00% 0.00% 0.25% 0.25% Wrapper Fees and Expenses % 0.21% 0.21% 0.21% 0.21% 0.21% Acquired Fund Fees and Expenses % 0.01% 0.01% 0.01% 0.01% 0.01% Total Annual Fund Operating Expenses (based upon aggregate average net assets) % 0.47% 0.52% 0.77% 1.02% 1.27% Fee Waivers and/or Expense Reimbursements 7... (0.01)% (0.01)% (0.01)% (0.01)% (0.01)% (0.01)% Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements % 0.46% 0.51% 0.76% 1.01% 1.26% R Pricing 1 FITC pays services fees out of its management fees. FITC will not reduce or otherwise modify its management fees in the event that such services are not used by any Participating Trust. 2 FITC pays plan level recordkeeping fees out of its management fees. FITC will not reduce or otherwise modify its management fees in the event that such services are not used by any Participating Trust. 3 Instead of the 0.05% fee described above, FITC will make a payment out of its Management Fee equal to a specified dollar amount of $12 per participant in accordance with an alternative arrangement described in Payments to Fund Service Providers. 4 Wrapper Fees and Expenses include all fees associated with the Fund s investment in synthetic GICs and separate account GICs, as defined herein, including investment advisory fees paid in conjunction with externally managed synthetic GICs. Please see footnote 6 for instructions on how to access updated expense information. 5 Participating Trusts indirectly bear the expenses of the acquired funds in which the Fund invests. As presented above, the Fund s indirect expense from investing in acquired funds is based on the acquired funds annualized ratio of operating expenses for the most recent fiscal period as disclosed in the acquired fund s most recent shareholder report. 6 The percentages shown are based on expenses for the entire fiscal year ended December 31, However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. For updated expense information, please go to FederatedInvestors.com. After you have created a profile on FederatedInvestors.com, you may access such information at the Products section of the website s home page by selecting Collective Investment Funds, agreeing to the Qualified Investors Certification, clicking on All, selecting the Fund name and Pricing Option, clicking on the Literature page and clicking on the designated link titled Assistance for Participant Level Fee Disclosure 404(a). 5 7 Fee Waivers and/or Expense Reimbursements are made in conjunction with investments in acquired funds that are Affiliated Funds, as described under Investment Information Fund Investments Affiliated Funds. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other investment options. The Example assumes that you invest $1,000 for the time period indicated and then redeem all of your units of participation ( Units ) at the end of that period. The Example also assumes that your investment has a 0% return and that operating expenses are as shown in the table above and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be: Pricing Option 1Year Y Pricing $ 4.09 R6 Pricing $ 4.59 Institutional Pricing $ 5.09 Institutional Service Pricing $ 7.57 Service Pricing $10.05 R Pricing $

5 AVERAGE ANNUAL TOTAL RETURN TABLE Y Pricing commenced operations on January 21, 2011, as the result of a split from Institutional Pricing. For the period prior to the commencement of operations of Y Pricing, the performance information shown is for Institutional Pricing, adjusted to reflect the expenses of Y Pricing. Please note that the performance of Institutional Pricing reflects certain fee reductions made by the Trustee in conjunction with the Fund s investment in Affiliated Funds, as described under Investment Information Fund Investments Affiliated Funds. R6 Pricing commenced operations on August 3, For the period prior to the commencement of operations of R6 Pricing, the performance information shown is for Y Pricing, adjusted to reflect the expenses of R6 Pricing. Please note that the performance of Y Pricing reflects certain fee reductions made by the Trustee in conjunction with the Fund s investment in Affiliated Funds, as described under Investment Information Fund Investments Affiliated Funds. Service Pricing commenced operations on January 10, For the period prior to the commencement of operations of Service Pricing, the performance information shown is for Institutional Service Pricing, adjusted to reflect the expenses of Service Pricing. Please note that the performance of Institutional Service Pricing reflects certain fee reductions made by the Trustee in conjunction with the Fund s investment in Affiliated Funds, as described under Investment Information Fund Investments Affiliated Funds. The Average Annual Total Return table shows returns for each Pricing Option averaged over the stated periods, and includes comparative performance information. The performance of each Pricing Option will fluctuate, and past performance is not necessarily an indication of future results. (For the Periods Ended December 31, 2016) Pricing Option 1 Year 5 Years 10 Years Y Pricing 1.23% 1.24% 2.42% R6 Pricing 1.18% 1.18% 2.36% Institutional Pricing 1.13% 1.14% 2.31% Institutional Service Pricing 0.88% 0.88% 2.06% Service Pricing 0.63% 0.63% 1.76% R Pricing 0.39% 0.39% 1.57% Bloomberg Barclays 1-3 Year Government/Credit Index % 0.92% 2.44% 1 The Bloomberg Barclays 1-3 Year Government/Credit Index is an unmanaged index considered representative of performance of short-term U.S. corporate bonds and U.S. government bonds with maturities from one to three years. Certain Required Disclosures Under ERISA Section 408(b)(2), FITC is required, in its capacity as a provider of fiduciary services to the Fund, to disclose comprehensive information about its fees and potential conflicts of interests to fiduciaries of Participating Trusts in order to assist such fiduciaries in: (1) assessing the reasonableness of investing in the Fund, including the reasonableness of the compensation paid to Fund service providers and potential conflicts of interest that may affect the performance of such service providers; and (2) obtaining the information that they need to satisfy their separate reporting and disclosure obligations to participants in the Participating Trusts. The various types of these required disclosures and information on how to access them are presented in the following schedules: SCHEDULE OF SERVICES AND COMPENSATION The following is a guide to the location in either this Offering Circular or the amended and restated Trust Document effective August 23, 2016 of important information concerning the services to be provided by FITC to the Fund which should be considered by Qualified Participants as defined herein before electing to make any investment in the Fund. The Trust Document may be found at FederatedInvestors.com. 3

6 Required Information Description of the services that FITC will provide or cause to be provided to the Fund. A statement concerning the services FITC will provide as an ERISA fiduciary. Compensation FITC and related parties will receive from Participating Trusts ( direct compensation). Compensation FITC and related parties will receive from other parties that are not related to FITC ( indirect compensation). As permitted under the Offering Circular and applicable law, FITC may invest in one or more funds advised, administered or distributed by a parent, subsidiary or affiliate of FITC ( Affiliated Funds ). Compensation that will be paid among FITC and related parties. Compensation FITC will receive if you terminate your investment in the Fund. The cost to Participating Trusts of recordkeeping services. Fees and expenses related to the investment of Participating Trusts in the Fund. Location(s) Offering Circular 1. The Trustee and Investment Adviser to the Trustee sections under Fund Management. 2. Management Fees, Services Fees, Plan Level Recordkeeping Fees, Consulting Services Fees, and Participant Level Recordkeeping Fees sections under Payments to Fund Service Providers. Trust Document 1. Article IV: Powers of the Trustee. 2. Article VII: Records and Accounting. 3. Article VIII Trustee s Liability; Section 8.4 Exercise of Discretion. Offering Circular The Trustee and Investment Adviser to the Trustee sections under Fund Management. None. Note: Under ERISA Section 408(b)(2) and the implementing regulations, compensation paid to service providers from the Fund is considered indirect compensation and, as such, is described below. Note: Under ERISA Section 408(b)(2) and the implementing regulations, compensation paid to service providers from the Fund is considered indirect compensation. Offering Circular 1. Fee Table section under Fees and Expenses. 2. Management Fees, Services Fees, Plan Level Recordkeeping Fees, Consulting Services Fees, and Participant Level Recordkeeping Fees sections under Payments to Fund Service Providers. 3. Affiliated Funds subsection under Fund Investments section under Investment Information. Trust Document Article IX Fees and Expenses. Offering Circular 1. Items listed as Fees paid out of Management Fees under the Management Fees line item of the Fee Table under Fees and Expenses. 2. Participant Level Recordkeeping Fees line item of the Fee Table under Fees and Expenses. 3. Management Fees, Plan Level Recordkeeping Fees, and Participant Level Recordkeeping Fees sections under Payments to Fund Service Providers. Note: Withdrawals resulting from the termination of a Participating Trust s investment in thefundmayonlybemadeon12months advance notice. Offering Circular 12-Month Written Notice Withdrawals and Forced Withdrawals sections under Withdrawals from the Fund. Trust Document Article VI Additions and Withdrawals; Section 6.2 Withdrawals. Offering Circular 1. Plan Level Recordkeeping Fees line item of the Fee Table under Fees and Expenses. 2. Participant Level Recordkeeping Fees line item of the Fee Table under Fees and Expenses. 3. Plan Level Recordkeeping Fees and Participant Level Recordkeeping Fees sections under Payments to Fund Service Providers. Offering Circular 1. Fee Table section under Fees and Expenses. 2. Example under Fees and Expenses. 4

7 SCHEDULE OF 404(A) INFORMATION Additional information about the Fund which is required for plan administrators to comply with their disclosure obligations under ERISA Section 404(a) is set out in the following schedule: Disclosure Investment Type or Category of the Fund Performance Data Benchmark Fees and expenses related to the investment of Participating Trusts in the Fund Investment Objective Investment Strategies Investment Risks Investment Securities Portfolio Turnover Glossary of Investment Terms Location(s) Offering Circular General Information, and Investment Objective section under Investment Information. Offering Circular Average Annual Total Return Table section under Fees and Expenses. Website This Performance Data is updated no less frequently than every three months and is available at FederatedInvestors.com. After you have created a profile on FederatedInvestors.com, you may access the investor fact sheet, which includes such information, at the Products section of the website s home page by selecting Collective Investment Funds, agreeing to the Qualified Investors Certification, clicking on All, selecting the Fund name and Pricing Option, clicking on the Literature page, and clicking on the designated link thereon. Offering Circular Benchmark section under Account and Unit Information. Offering Circular 1. Fee Table section under Fees and Expenses. 2. Example under Fees and Expenses. Total annual operating expenses expressed as a dollar amount for a $1,000 investment (assuming no returns) equals $4.09 for Y Pricing; $4.59 for R6 Pricing; $5.09 for Institutional Pricing; $7.57 for Institutional Service Pricing; $10.05 for Service Pricing; and $12.52 for R Pricing. Website This fee and expense data is available at FederatedInvestors.com. After you have created a profile on FederatedInvestors.com, you may access such information at the products section of the website s homepageby selecting Collective Investment Funds, agreeing to the Qualified Investors Certification, clicking on All, selecting the Fund name and Pricing Option, clicking on the Literature page, and clicking on the designated link titled Plan Level Expense Disclosure Document. Offering Circular Investment Objective section under Investment Information. Trust Document Article III Investments; Section 3.1 Investment Objective. Website The investment objective is available at FederatedInvestors.com. After you have created a profile on FederatedInvestors.com, you may access the investor fact sheet, which includes such information, at the products section of the website s home page by selecting Collective Investment Funds, agreeing to the Qualified Investors Certification, clicking on All, selecting the Fund name and Pricing Option, clicking on the Literature page, and clicking on the designated link thereon. Offering Circular Investment Strategies section under Investment Information. Trust Document Article III Investments; Section 3.2 Investment Policies. Offering Circular Investment Risks section under Investment Information. Offering Circular Fund Investments section under Investment Information. Trust Document Article III Investments; Section 3.2 Investment Policies. Offering Circular Portfolio Turnover subsection under Investment Securities section under Investment Information. Website The portfolio turnover rate is available at FederatedInvestors.com. After you have created a profile on FederatedInvestors.com, you may access the investor fact sheet, which includes such information, at the products section of the website s home page by selecting Collective Investment Funds, agreeing to the Qualified Investors Certification, clicking on All, selecting the Fund name and Pricing Option, clicking on the Literature page, and clicking on the designated link thereon. Two glossaries of investment terms that participants and beneficiaries may find helpful in understanding the investment characteristics of the Fund have been prepared by separate industry groups. These glossaries, entitled Sample Glossary of Collective Investment Fund Terms for Disclosures to Retirement Plan Participants and Sample Glossary of Investment- Related Terms for Disclosures to Retirement Plan Participants, were prepared by the American Bankers Association and the SPARK Institute and the Investment Company Institute, respectively, and may be accessed at and 5

8 Investment Information INVESTMENT OBJECTIVE The Fund is a collective investment fund that seeks to maintain a stable value of $10.00 per Unit. The Fund cannot guarantee that the value of its Units will always remain at $ The Fund s investment objective is stability of principal and high current income. The Fund pursues this investment objective by investing primarily in guaranteed investment contracts (GICs), money market products and other stable value products that can be carried at contract value. While there is no assurance that the Fund will achieve its investment objective, it endeavors to do so by following the policies described in this Offering Circular. INVESTMENT STRATEGIES The Fund will seek to invest in GICs, including traditional GICs, synthetic GICs and separate account GICs, to the maximum extent consistent with the credit and liquidity parameters established by Federated Investment Counseling, the Fund s investment adviser ( Adviser ). However, the Fund s investments will not be limited to GICs, and the Fund may invest without limitation in money market products and other stable value products that can be carried at contract value. The Fund will seek to maintain a dollar-weighted average maturity (WAM) between six months and five years. The Adviser actively manages the Fund, seeking to limit the credit risk taken by the Fund and to select investments with enhanced yields. The Adviser performs a comprehensive credit analysis to develop an approved database of issuers. The Adviser continuously monitors the credit quality of approved issuers by conducting internal credit evaluations and reviewing ratings of nationally recognized statistical rating organizations. The Adviser will seek to diversify the Fund among appropriate stable value instruments. Traditional GICs will be laddered such that the Fund generally will have traditional contracts maturing on a monthly basis. The Adviser anticipates that these maturities may provide an additional source of liquidity for the Fund during adverse market conditions, and allow the Fund to reinvest at current market interest rates. The Fund may also invest in short-term and floating rate traditional GICs, in anticipation of rising interest rates. The synthetic GICs in which the Fund invests may be managed by the Adviser or by an investment adviser that is not affiliated with FITC (collectively, Synthetic GICs ). The Synthetic GIC wrap provider establishes investment parameters for the Synthetic GIC with input from the Adviser and/or the unaffiliated investment adviser. The performance of Synthetic GICs may be enhanced by attempting to target a specific duration or maturity structure based upon interest rates and other economic conditions. For Synthetic GICs managed by an unaffiliated investment adviser, the Adviser analyzes the credit characteristics of the financial institution that provides the wrap agreement for the Synthetic GIC. The Adviser additionally performs oversight and approval functions with respect to the unaffiliated advisers, which may include establishing approved issuer or counterparty lists with respect to the underlying fixed-income securities, reviewing purchases and sales of the underlying fixed-income securities and providing oversight of the unaffiliated adviser s view of market dynamics and management recommendations with respect to the underlying fixed-income securities. The assets underlying the separate account GICs in which the Fund invests are managed by the insurance company issuing the GIC, or on behalf of the insurance company issuing the GIC, including an affiliate of the Trustee. In evaluating separate account GICs, the Adviser will consider the duration and performance history of the separate account assets, in addition to the credit characteristics of the insurance company issuing the separate account GIC. In the aggregate, no more than 25% of the Fund s total assets at the time of purchase will be invested in GICs, including traditional GICs, separate account GICs and Synthetic GICs, issued by any single entity. Temporary Investments The Fund may temporarily depart from its principal investment strategies by shortening the Fund s WAM. It may do this in response to unusual market circumstances such as: adverse market, economic or other conditions (for example, during periods when there is a shortage of appropriate investment securities); to maintain liquidity to meet withdrawals; or to accommodate cash inflows. It is possible that such investments could affect the Fund s investment returns and/or the Fund s ability to achieve its investment objective. 6

9 FUND INVESTMENTS Traditional GICs A traditional GIC is a contract with an insurance company pursuant to which the purchaser agrees to deposit money with the insurance company and the insurance company promises to pay interest at a guaranteed rate for the life of the contract and return the principal at maturity. Traditional GICs are general obligations of the issuing insurance company. The purchase price paid by the Fund for the traditional GIC becomes part of the general account assets of the insurance company, and the principal is paid at maturity from the general account assets of the insurance company. Traditional GICs may have fixed or floating interest rates. Separate Account GICs A separate account GIC is a contract with an insurance company that is backed by the assets of a separate account of the insurance company. The assets in the separate account may be managed by an affiliate of the insurance company, or a thirdparty investment adviser, including an affiliate of the Trustee. The interest rate on a separate account GIC resets periodically based upon the experience of the cash flow or market value of the separate account assets. The securities held in the separate account are owned by the insurance company but are held for the exclusive benefit of investors in the separate account. Synthetic GICs To structure a Synthetic GIC, the Fund purchases one or more fixed-income securities which are then held and owned by the Fund on behalf of Participating Trusts. The underlying fixed-income securities for Synthetic GICs that the Fund may purchase include, but are not limited to, U.S. government securities, mortgage-backed securities, asset-backed securities, corporate bonds and shares of collective investment funds and investment companies invested primarily in such securities, including the Affiliated Funds discussed elsewhere in this Offering Circular. The Fund then contracts with a financial institution such as an insurance company or bank to provide for payments for certain Participating Trust withdrawals at contract value. This contract is typically referred to as a wrap agreement and the financial institution counterparty is referred to as a wrap provider. The interest rate for a Synthetic GIC, known as the crediting rate, is based initially on the yield to maturity of the underlying fixed-income securities. This rate will change based on the experience of the cash flow, duration and market value of the underlying fixed-income securities. The Synthetic GICs used within the Fund are backed by portfolios of fixed-income securities that are actively managed in varying investment styles. Active management of the fixed-income securities can improve diversification and enhance performance of the Fund through the use of traditional fixed-income management strategies including, but not limited to, sector allocation, yield curve analysis and issue selection. Money Market Instruments The Fund may invest in various high-quality, short-term, fixed-income securities that can be carried at contract value and have a maturity of 90 days or less and in collective investment funds and investment companies invested primarily in such high-quality, short-term, fixed-income securities. Examples of these securities include, but are not limited to: Money market mutual funds; Short-term collective investment funds; Short-term obligations of the U.S. government, its agencies or instrumentalities; Certificates of deposit, demand and time deposits, bankers acceptances, and other instruments of domestic banks and other deposit institutions with capital, surplus and profits over $100,000,000; Commercial paper; Variable-rate demand notes; Repurchase agreements; and Money market tranches of asset-backed securities. Other Investments The Fund may invest in any other fixed-income securities that can be carried at contract value, including bank investment contracts, annuities, group annuity contracts and funding agreements issued by insurance companies. Portfolio Turnover The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in the Total Annual Fund Operating Expenses line item of the Fee Table, or in the Example, affect the Fund s performance. For the fiscal year ended December 31, 2016, the Fund s portfolio turnover rate was 6%. 7

10 Affiliated Funds A portion of the Fund s assets may be invested in one or more funds that are advised, administered or distributed by a parent, subsidiary or affiliate of the Trustee ( Affiliated Funds ). Affiliated Funds will incur fees and expenses that will be borne indirectly by the Fund in connection with any such investments. However, fees received by the Trustee from the Fund will be offset in an amount equal to the Fund s proportionate share of any investment advisory, administrative, or other fees paid by the Affiliated Funds to the Trustee or its affiliates. As a result, the Trustee and its affiliates will receive no additional fees in connection with the investment by the Fund in Affiliated Funds. Although the Fund indirectly will bear fees and expenses paid to third parties from an Affiliated Fund, the Trustee believes that the benefits and efficiencies associated with such an investment should outweigh the additional expenses the Fund may incur in connection therewith. The Affiliated Funds in which the Fund may currently invest, either directly or through Synthetic GICs, include, but are not limited to, funds which have a non-fluctuating NAV and no restrictions on liquidity (i.e., fees or gates). Such funds may include, but are not limited to, government money market funds, short-term collective investment funds, and any other nonfluctuating fund which meets the credit criteria established by the Trustee. Affiliated Funds in which the Fund may invest include, for example, Federated Prime Cash Collective Investment Fund, a collective trust maintained by the Trustee, Federated Government Obligations Fund and Federated Treasury Obligations Fund, each of which is a money market mutual fund advised by an affiliate of the Trustee and registered under the Investment Company Act of To the extent the Federated Prime Cash Collective Investment Fund invests in another Affiliated Fund, fees received by the Trustee or its affiliates from such Affiliated Fund will be offset in the same manner as described above. The Fund may invest in other Affiliated Funds, as the Trustee may determine in its discretion. Information concerning such Affiliated Funds is available in the Products section of Federated s website at FederatedInvestors.com or by calling By signing the Agreement, each Participating Trust approves the investment of Fund assets in Affiliated Funds as described above. INVESTMENT RISKS The following provides general information on the risks associated with the Fund s principal investments. These are the primary factors that may negatively impact the Fund s ability to maintain a stable unit value of $10.00 or reduce the Fund s yield. There is no guarantee that the Fund will maintain a stable Unit value, that it will provide a certain level of income or that any such income will exceed the rate of inflation. Further, the Fund s yield will vary. Credit Risk Credit risk is the possibility that the issuer of an investment security, including the GICs held in the Fund, will default by failing to pay interest or principal when due. The Adviser tries to minimize this risk by purchasing higher-quality investment securities and conducting a comprehensive credit review. In the case of a Synthetic GIC, the risk of loss due to default of the wrap provider is reduced somewhat because the Fund owns the securities underlying the Synthetic GIC; however, there is a risk that the market value of the securities owned may be lower than the contract value previously credited under the wrap agreement. Additionally, Synthetic GICs may not cover all losses on underlying securities which default or experience a credit downgrade. Defaults by and credit downgrades of GIC issuers and the issuers of securities underlying Synthetic GICs could result in the inability of the Fund to maintain a stable Unit value as well as reduce the Fund s yield. Reinvestment Risk Because the income earned on the Fund s portfolio at any given date will reflect the rate borne by investments purchased over several years, the yield of the Fund will vary from current market rates of interest. During any period in which there are net purchases of Fund Units, the Fund must invest the proceeds at prevailing market yields or hold cash. If the Fund holds cash, or if the yield of the securities purchased is less than that of the securities already in the portfolio, the Fund s yield will likely decrease. Conversely, net purchases during any period in which short-term yields rise will cause the Fund s yield to increase. The larger the amount that must be invested or the greater the difference between the yield of the securities purchased and the yield of the existing investment, the greater the impact will be on the yield of the Fund. The Fund retains the discretion to close to new investments in any circumstance. However, the Fund is not required to close, and no assurance can be given that this will be done in any given circumstance. Accordingly, there is no guarantee that the Fund will provide a certain level of income or that any such income will exceed the rate of inflation. Investment Contract Risk GIC issuers have the right to terminate their GICs under various circumstances, some of which may be outside of the Fund s control and due to conduct of Participating Trusts or certain changes in the regulatory environment. In certain circumstances, such as a credit downgrade of a GIC issuer, the Fund may choose to terminate a GIC. If one of these instances were to occur and the Fund was not able to find a substitute GIC or otherwise achieve a stable value for that 8

11 portion of the Fund s assets, the Fund s Unit value might fall and investors might experience a loss. In addition, GICs contain certain terms and conditions applicable to Participating Trusts and their participants which are required in order for Participating Trust participants to receive benefit responsive treatment when withdrawing their Units. If such Participating Trusts and/or their participants do not comply with such terms and conditions, as set forth in this Offering Circular and in the relevant provisions of the Agreements, it is possible that Participant-directed withdrawals might not be eligible for Daily Withdrawals as discussed below. Furthermore, GICs impose restrictions on the ability of a Participating Trust to withdraw its investment from the Fund for up to 12 months and may require that a Participating Trust withdraw from the Fund upon the occurrence of certain events. Crediting Rate Risk Synthetic and separate account GICs utilize a crediting rate formula intended to amortize the market value gain or loss of the assets backing each GIC over the duration of the assets in the relevant portfolio as well as reflect actual interest paid on the wrapped securities and cash flows in and out of the contract. The terms of each GIC determine when the crediting rate for the assets backing such contract will be reset. In most cases, crediting rates are reset quarterly and upon the occurrence of certain triggering events. The Fund s yield is calculated by aggregating the crediting rates of all GICs in the Fund, as well as any yield on the Fund s investments in cash or cash equivalents and other Fund investments that are not GICs. When the crediting rate of any GIC is decreased to adjust for situations in which the market value of the underlying assets is below the book value of the contract and/or due to negative cash flows, the Fund s yield may also decrease accordingly, and in some cases, the crediting rate may be reduced to, but not below, 0%. Crediting rates are likely to differ from the current yields on other fixed income investments of comparable duration, and because crediting rates are reset only periodically, they may be substantially different from such current rates. Moreover, particularly during periods of rising interest rates, GIC crediting rates and the Fund s yield may be substantially below current yields on money market funds and other short-term fixed income investments. Interest Rate Risk Prices of fixed-income securities rise and fall in response to changes in interest rate. Generally, when interest rates rise, prices of fixed-income securities fall. However, market factors, such as the demand for particular fixed-income securities, may cause the price of certain fixed-income securities to fall while the prices of other securities rise or remain unchanged. The longer the duration of a fixed-income security, the more susceptible it is to interest rate risk. Recent and potential future changes in monetary policy made by central banks and/or their governments are likely to affect the level of interest rates. Duration measures the price sensitivity of a fixed-income security given a change in interest rates. Sector Risk A substantial part of the Fund s investments may be issued or wrapped by insurance companies or companies with similar characteristics. As a result, the Fund will be more susceptible to any economic, business, political or other developments that generally affect these entities. Developments affecting insurance companies or companies with similar characteristics might include changes in interest rates, changes in economic cycle affecting credit losses, adverse claims experience, regulatory changes and industry consolidation. Technology Risk The Adviser uses various technologies in managing the Fund, consistent with its investment objective and strategy described in this Offering Circular. For example, proprietary and third-party data and systems are utilized to support decision-making for the Fund. Data imprecision, software or other technology malfunctions, programming inaccuracies and similar circumstances may impair the performance of these systems, which may negatively affect Fund performance. Legal/Legislative Risk Congress, governmental entities, and other regulatory organizations have the power to change existing laws, rules, and regulations affecting the Fund. Such changes may adversely impact the Fund, including its ability to maintain a stable value of $10.00 per Unit. Cybersecurity Risk Like other funds and business enterprises, the use of the Internet and other electronic media and technology exposes the Fund, the Fund s shareholders, and the Fund s service providers, and their respective operations, to potential risks from cyber-security attacks or incidents (collectively, cyber-events ). Cyber-events may include, for example, unauthorized access to systems, networks or devices (such as, for example, through hacking activity), infection from or spread of malware, computer viruses or other malicious software code, corruption of data, and attacks which shut down, disable, slow or otherwise disrupt operations, business processes or website or internet access, functionality or performance. Like other 9

12 funds and business enterprises, the Fund and its service providers have experienced, and will continue to experience, cyberevents consistently. Cyber-events have not had a material adverse effect on the Fund s business operations or performance. In addition to intentional cyber-events, unintentional cyber-events can occur, such as, for example, the inadvertent release of confidential information. Any cyber-event could adversely impact the Fund and its shareholders and cause the Fund to incur financial loss and expense, as well as face exposure to regulatory penalties, reputational damage and additional compliance costs associated with corrective measures. A cyber-event may cause the Fund, or its service providers, to lose proprietary information, suffer data corruption, lose operational capacity (such as, for example, the loss of the ability to process transactions, calculate the Fund s NAV, or allow shareholders to transact business), and/or fail to comply with applicable privacy and other laws. Among other potentially harmful effects, cyber-events also may result in theft, unauthorized monitoring and failures in the physical infrastructure or operating systems that support the Fund and its service providers. In addition, cyber-events affecting issuers in which the Fund invests could cause the Fund s investments to lose value. The Fund s Adviser and its relevant affiliates have established risk management systems reasonably designed to seek to reduce the risks associated with cyber-events, however, there is no guarantee that the efforts of the Adviser or its affiliates, or other service providers, will succeed, either entirely or partially. Among other reasons, the nature of malicious cyber-attacks is becoming increasingly sophisticated and the Fund s Adviser, and its relevant affiliates, cannot control the cyber systems and cyber security systems of issuers or third-party service providers. Valuation of Units Units are valued each day the New York Stock Exchange is open ( Business Day ), provided that the Trustee in its discretion may designate additional days as Business Days. The Fund will attempt to maintain a stable value of $10.00 per Unit. However, there can be no assurance that the value of Units in the Fund will not fluctuate. The value of each Unit is determined by subtracting total liabilities from total assets and dividing the remainder by the number of Units outstanding. The Fund s assets will generally be valued at fair value as determined in good faith by the Trustee in accordance with the valuation procedures set forth in the Declaration of Trust. The valuation procedures are intended to comply with The American Institute of Certified Public Accountants Statement of Position Accordingly, the Trustee anticipates that GICs held by the Fund may be valued at contract value, which is expected to approximate fair value. Investing in the Fund QUALIFIED PARTICIPANTS The Fund is exempt from federal income taxation and from registration with the Securities and Exchange Commission. In order to preserve these exemptions, the Trustee will only accept assets of certain eligible investors ( Qualified Participants ). As more fully described in the Trust Document, Qualified Participants include: (i) certain employee benefit trusts exempt from federal income taxation under Code Section 501(a); (ii) certain governmental plans or units described in Code Section 414(d), Code Section 457(b) and Code Section 818(a)(6); (iii) certain church plans described in Code Section 414(e) that are either exempt from federal income taxation under Code Section 501 or described in Code Section 403(b)(9); (iv) certain commingled trust funds exempt from federal income taxation under Code Section 501(a) which consist solely of the assets of eligible employee benefit plans and trusts; and (v) certain assets of insurance companies that are segregated in a separate account, provided that the assets in the separate account consist solely of assets of eligible employee benefit plans and trusts (each, a Separate Account Plan ). Qualified Participants also include any other pension plan, trust or other investment entity whose investment in the Fund would not jeopardize the Fund s tax exemption under Section 501(a) of the Code, its treatment as a group trust or its exemption from the registration requirements of the federal and state securities laws, all as determined by the Trustee in its sole discretion. The Fund may be used in an asset allocation model program (e.g., target-risk and/or target-date) or similar program, offered by a Participating Trust, subject to the prior review and written approval of the Trustee which Trustee will make in its sole discretion. The Participating Trust must comply with requests for information with respect to re-determinations. The Fund does not accept investments from defined benefit plans, individual retirement accounts (IRAs) or 403(b) plans, except as noted above. The Fund also does not accept investments from Keogh Plans (directly or through commingled funds or separate accounts). ESTABLISHING AN ACCOUNT To establish an account in the Fund: An account must be established through a financial intermediary, pursuant to the financial intermediary s procedures for transacting with the Fund. For more information about how to open an account, contact a financial intermediary directly. 10

13 A Qualified Participant should obtain an Agreement from a representative of the Trustee. By executing the Agreement, the fiduciary or plan trustee warrants that the plan is a Qualified Participant; that the underlying plan document includes appropriate provisions authorizing the investment in the Fund; that, to the extent it is a fiduciary to an ERISA plan, it has reviewed the information that the Trustee is required to provide to such plan fiduciaries under Section 408(b)(2) of ERISA as identified under Certain Required Disclosures and determined that its investment of the plan s assets in the Fund constitutes a reasonable exercise of fiduciary authority; and that the plan will comply with the Fund s requirements set forth in the Declaration of Trust and this Offering Circular. In the case of a Qualified Participant that is an insurance company separate account, these representations and warranties may be required from a fiduciary or trustee of each Separate Account Plan investing through the separate account. The Trustee reserves the right to reject any Agreement which does not include the information necessary to process such Agreement, including the Qualified Participant s designation of the applicable Fund Pricing Option. Only when a properly executed Agreement is approved by the Trustee does the initial investment in the Fund occur. Qualified Participants whose Agreements are accepted by the Trustee and Separate Account Plans are referred to herein as Participating Trusts. For additional instructions on completing an Adoption Agreement, please see the Capital Preservation Fund Application & Adoption Agreement Information and Instructions document at FederatedInvestors.com. Order entry and telephone requests for additions must be received from Participating Trusts by 4:00 p.m. (Eastern time). The Trustee reserves the right to reject any purchase request. PAYMENT FOR UNITS By Check Make the check payable to Capital Preservation Fund, note the account number on the check, and mail it to: Federated Funds P.O. Box 8600 Boston, MA If sending the check by a private courier or overnight delivery service that requires a street address, mail it to: Federated Funds 30 Dan Road Canton, MA Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund reserves the right to reject any purchase request. For example, to protect against check fraud the Fund may reject any purchase request involving a check that is not made payable to Capital Preservation Fund (including, but not limited to, requests to purchase Units using third-party checks), or involving temporary checks or credit card checks. By Wire Send your wire to: State Street Bank and Trust Company Boston, MA Dollar Amount of Wire ABA Number BFN: Attention: Federated EDGEWIRE Wire Order Number, Dealer Number or Group Number Nominee/Institution Name Fund Name and Number and Account Number Units cannot be purchased by wire on holidays when wire transfers are restricted. Withdrawals From the Fund 12-MONTH WRITTEN NOTICE WITHDRAWALS Participating Trusts shall be required to provide the Trustee with written notice 12 months in advance for any withdrawal that results from an employer-initiated event. Employer-initiated events shall include, but are not limited to the following: The partial or complete termination of the Participating Trust; The elimination of the Fund from the Participating Trust s plan line-up or Intermediary s platform; 11

14 A termination of employment resulting from: The transfer or other change of employment from an employer to a parent, subsidiary or any company under common ownership or control with the employer; Any change of employers as the result of the spin-off, sale or merger of any unit of the employer or Plan sponsor; or Any termination of employment that, either in its own right, or as part of a series of terminations of employment, is a partial termination under Section 411(d)(3) of the Code. The exclusion from coverage of a group of employees by the sponsor of the Participating Trust; The implementation of an early retirement program by the sponsor of the Participating Trust; Changes made to a Trustee-approved asset allocation model or similar program; Transfers or redemptions resulting from employer-initiated events are not considered participant-directed exchanges; To the extent that a fiduciary to a Participating Trust, or a consultant or recordkeeping agent retained by the Participating Trust, intentionally and specifically advises participants in writing to withdraw from the Fund, resulting withdrawal requests by participants will be considered to have resulted from an employer-initiated event. Any total withdrawal requests by a Participating Trust. The Trustee has absolute discretion to determine that a transfer is the result of an employer-initiated event. The Trustee may waive or reduce the 12-month notice requirement to the extent that the Trustee determines, in its sole discretion, that such waiver or reduction would not negatively impact the Fund or the Participating Trusts. DAILY WITHDRAWALS Subject to limitations described under 12-Month Written Notice Withdrawals and in the Trust Document, Participating Trusts may make withdrawals from the Fund on a daily basis for the following purposes: To make bona fide benefit payments to participants on death, retirement, disability or termination of employment as provided for in the Participating Trust s plan document; To make participant loans permitted under the Participating Trust s plan document and Department of Labor regulations; To pay plan expenses which are eligible under ERISA for payment from the Participating Trust s assets pursuant to its plan document; To make payments from a forfeiture account in accordance with its plan document; To honor requests by individual participants in Participating Trusts which allow participants to direct their own investments, with the following limitations: Exchanges into a Non-Competing Investment may be made on a daily basis. Exchanges into a Competing Investment must first be directed into a Non-Competing Investment for a period of 90 days, after which time the exchange into the Competing Investment may be completed. A Competing Investment is an investment option under a Participating Trust that is: (1) a stable value fund; (2) a money market fund; (3) any other fund that, either directly or indirectly through investments in another fund, maintains: (a) at least 80% of its assets in fixed income securities; and (b) an average effective duration of three years or less; or (4) an option within a self-directed brokerage account (SDBA) investment option of the type described in items (1), (2) or (3) above. Notwithstanding the foregoing: (i) any fund that is categorized as a high yield bond fund by Morningstar or a similar investment research services provider shall be deemed a Non-Competing Investment, provided that such fund maintains an average effective duration of 1.5 years or more; and (ii) no option within an SDBA will be a Competing Investment, provided that the SDBA is maintained by a Participating Trust that: (a) had fewer than 200 participants as of May 31, 2011; or (b) had less than $3,000,000 invested in the Fund as of May 31, For purposes of this paragraph, fund includes any investment company registered under the 1940 Act, any commingled investment vehicle that is exempt from registration under the 1940 Act, and any other product or option. From time to time, the Fund may specifically designate certain funds as a Non-Competing Investment with the approval of the issuers of GICs held by the Fund. After you have created a profile on FederatedInvestors.com, you may access the names of any funds so designated at the Products section of the website s home page by selecting Collective Investment Funds, agreeing to the Qualified Investor Certification, clicking on All, selecting the Fund name and pricing option, clicking on the Fund Overview page, and clicking on the designated link thereon. A Participating Trust, or a fiduciary or other services provider on behalf of each Participating Trust, is required to determine, using Morningstar or other reasonable means, whether there are Competing Investments offered under the Participating Trust before purchasing Units of the Fund. After such initial determination, a Participating Trust, or a fiduciary or other services provider on behalf of each Participating Trust, is required to determine, using Morningstar or other reasonable means, whether an investment option is a Competing Investment: (i) before such investment option is added as an investment option under the Participating Trust; and (ii) at least annually thereafter. 12